Online stock trading and investing is a new obsession for the financially literate section of society; given the proliferation of mobile applications and websites, these investors can try their luck whenever and wherever. Although a tech-driven approach has greatly simplified the process, the online investment landscape is an exclusive revenue-generating domain globally. One aspect where investors are still struggling is coming up with profitable decisions, as it can get overwhelming to find a perfect balance between rational thoughts and gut instincts.
Multiple analytical techniques are there to sort this out, and any novice investor who is just starting seeks professional guidance to set everything right. Still, there are some common mistakes that a logical investor cannot afford to make. Therefore it is of utmost importance to get well-versed with the basic jargon and nitty and gritty details of the stock markets to gain a competitive edge.
A list of those common mistakes is as follows:
- Aimless investment: not having a plan may be adventurous in some aspects of life, but not if you are heading out to invest your money in a particular stock or equity. One should have a crystal clear vision of how the good money could be used for asset building, higher education, retirement, or a much-awaited vacation plan. The amount to be invested, duration, and type of security depend on the investor’s ultimate goal.
- Blindly following the market trend: media hype is everywhere. For seasoned investors, trending news content and financial data are significant in making investment decisions. However, too much dependency on market trends and investing in fashionable securities may lead to an unprecedented loss of wealth. So it is advisable to conduct a self-research before investing based on speculation.
- Ignoring the portfolio: having a portfolio is critical for all investors, whether old, experienced, or amateur, because there are multiple advantage factors associated with the portfolio, such as diversification of investment across different asset classes and securities, management of risk, and setting specific goals.
- Investing only in high-performing securities: It is not wise to invest in securities merely by looking at their previous performance because there is no guarantee that they will keep performing the same way in the future. That is why digging deep down into the financial standing of a company you choose to invest in, its cash flow, and its balance sheet is necessary before you shortlist it for investment.
- Getting rid of stocks with falling prices: patience is the key when tapping on the huge profit potential of stock markets, and joining the sheep herd won’t help at all. Sometimes many investors end up selling their stocks at a lower price after a minor fluctuation and later regret their decision when some business giants buy them. Price fall is sometimes due to short-term conditions such as macroeconomic factors or negative speculation in the financial markets.
- Making random investment decisions: another common mistake that investors make is assuming stock investment to be a form of gambling where they pick any random security which they feel will do well and invest money in it.
These are only some anomalies that can lead to losses and disappointment. It is suggested to have some practical and theoretical knowledge before stepping into the landscape of investment. Trusting one’s instincts and cutting on the noise of rumors can save investors from self-doubts and hasty decisions.